The government will not likely abolish the entire system of contractualization in the country but restrict it, according to a former Labor undersecretary.
Contractualization, also known as “endo” (end of contract) and “5-5-5,” is the illegal practice of hiring and firing workers at the end of their five-month employment, enabling employers to avoid regularizing and giving them benefits such as pension coverage.
Josephus Jimenez, also former president of People Management Association of the Philippines Inc. (PMAP), told reporters at the sidelines of the 6th P&A Grant Thornton Business Forum on Wednesday that the Department of Labor and Employment (DOLE) will not likely deliver its promise to abolish contractualization by 50 percent by the end of this year, and 100 percent by 2017.
“This is my bottomline expectation: They [government]won’t abolish contractualization. They’ll only put restrictions,” Jimenez said.
Removing the contractualization system would hurt the economy as this system gives the Philippines “competitive advantage” over other regional economies, he added.
“My position is very simple, if 5-5-5 or ‘endo’ is illegal, then we have to stop it. But do not stop the entire system of outsourcing, because outsourcing is the thing that gives you competitive advantage. Without outsourcing, all the investors will go to Malaysia, Indonesia, Thailand, Vietnam, Cambodia, Myanmar, Laos, Brunei Darussalam,” Jimenez said.
He noted that a number of local companies with foreign investors have held back with their expansion and investment plans in the Philippines because of potential risks from policies of the Duterte administration.
“Yes, the economy will suffer [without contractualization]. In fact, some investors have already said, ‘[Look, we’re unstable here. Let us not put further investments because the policies are still unclear],’” Jimenez said.
He added that he knows of five companies that have withheld their expansion plans in the Philippines that would have employed 100,000 contractual workers in the transportation, food and packaging sectors.
Citing the latest Labor Force Survey (LFS) in July, Jimenez estimated that 60 percent of the 42.5 million Filipinos who are employed are regular, while 40 percent are working under contracts.
Jimenez cited 10 reasons why “legitimate” contractualization “could not be, should not be and would not be abolished in the country.”
He said “endo” contributes to the country’s competitiveness, provides employment opportunities, serves as first door to regular employment, allows on-the-job training, offers viable alternative to migration, adopts enough safety nets and gives adequate social protection, among others.
With its promise to abolish “endo,” the government through DOLE is amending Department Order No. 18-A — dubbed as the “Endo Law” — which is set to be released by the end of this month.
When asked about the Department of Trade and Industry’s proposed “win-win solution” on contractualization, Jimenez said he agrees with the DTI proposal, suggesting some improvements.